Avon’s Beauty Product Sales Soar 15% in Q3

Avon Products Inc. said Thursday third-quarter profit rose 60%, boosted by strong foreign sales, demand for new products and a tax benefit. Profit was $222.6 million, or 52 cents per share, from $139.1 million, or 32 cents per share, last year. Results in the most recent quarter included a 9 cent tax benefit.

Sales of beauty products rose 15%. The company’s 15% growth in beauty sales included increases in all categories: color was up 19%, fragrance grew 18%, skin care increased 9% and personal care rose 13%.

Active representatives increased 5%. Revenues benefitted 7% from pricing and mix, and units sold decreased 1% versus the prior-year quarter.

Total revenue rose 13% to $2.64 billion from $2.35 billion, partly because of higher prices and 15% growth in sales of beauty products.

“Avon’s third-quarter performance reflects continued momentum of our turnaround plan. Our investments in advertising and the Representative Value Proposition (RVP) are yielding strong results,” said Andrea Jung, chairman and CEO. “Again this quarter, growth in our beauty sales outpaced our overall revenue growth rate. Additionally, our performance is benefitting from the savings and benefits from our restructuring program and strategic initiatives, as those programs remain on track to our longer term expectations.”

Analysts surveyed by Thomson Reuters, who usually exclude one-time items from their estimates, expected 50 cents per share and sales of $2.6 billion.

During the quarter, advertising costs rose 11% to $106 million, as Avon ramped up marketing efforts to launch new products, Advertising supported the launch of new products, such as the Anew Rejuvenate line of skin care, U by Ungaro fragrances and Pro-To-Go lipstick, as well as representative recruitment advertising in priority markets.

Sales growth in North America rose just 3%. Sales of beauty products were flat, as the economy remained weak.

Looking ahead, New York-based Avon warned that softening consumer spending in North America and a higher U.S. dollar, if maintained at current levels, will crimp fourth-quarter results.

Avon still expects to achieve annual savings of $430 million, once its restructuring program is completed, which has included job cuts and outsourcing work to countries with cheaper labor costs.